The threat to our traditional retailers is growing on a daily basis, so what can be done to help secure the future of Australian retail businesses?
The Australian retail landscape has changed radically over the past five years as information technologies transform business models and practices.
For many of our largest retailers, this change has been viewed as predominantly negative, as more agile, pureplay online offerings and large, international competitors continue to corner a larger share of what was once an exclusive market.
At the ecommerce Conference & Exhibition in Melbourne last week, senior leaders at NetSuite were working hard to try and address these issues in their discussions with businesses of all stripes, hoping to provide some guidance on many areas of online retail.
We interviewed Mark Troselj, Managing Director of Asia Pacific and Japan and Andy Lloyd, General Manager of Commerce Products for NetSuite to discover more about what retailers should be considering when trying to future-proof their businesses against these threats.
Many people are now talking about wearable devices as the next ‘big thing’ in retail. How can this technology be used to assist retail sales and how will NetSuite be involved?
MT: The technology and the ability to capture information is such that we can even now implant it under the skin. Of course, consumers are a long way from being able to purchase this technology, but it also raises the question of acceptance – and that’s just as applicable to the current range of wearables.
From NetSuite’s point of view, it’s really all much of a muchness. Wearables are ultimately just another device with niche applications of their own. We look at the example of a toothbrush that knows when it needs replacing, or a car that knows when certain parts need replacing. We have customers that offer medical devices that are able to perform similar operations. They’re all machines that send information back to NetSuite to tell the supplier something – for the most part that means replacing a part, but the opportunities are many and varied.
AL: Wouldn’t it be great if those devices could tell when a tyre or a chain needs replacing? Wouldn’t it be even more great if it send information directly back to NetSuite and CELL Bikes to go about beginning the fulfilment process for those parts?
Usually the more specific the solution is that you’re releasing onto the market, the more value it adds for the consumer. That’s why the toothbrush example is so great, because it does just one thing and that’s replenishment. That’s also why the bike solution is an interesting opportunity as well.
Moving towards a future where you’re selling products that you don’t necessarily even have in a warehouse somewhere – as in, by selling a device that creates repeat sales for a corresponding retailer – that’s a very powerful proposition.
That means for the retailers of those devices, or the retailers that support those devices, they’ll either need to develop their own specialised support systems, or they’ll need to built them out on top of our existing infrastructure. The benefit of doing the latter means that you’d immediately have access to infrastructure that can handle millions and millions of transactions, but there may be specialised use cases where certain businesses may still need to take it one step further.
What are the major challenges for retailers today?
MT: The biggest hurdle for Australian retail brands isn’t necessarily in figuring how to get to that fine, granular level of data analysis, but more around leapfrogging out of their current infrastructure into a system that will at least allow them to do what they need to do with that data. We hear it from retailers all the time – they’re maintaining legacy systems, multiple ERP systems and multiple duplicates of customer records. That’s where Australian businesses need to escape from now and it’s a real challenge.
AL: Our current initiative is to collate and collect as much information around the customer as possible, because we see a lot of information there. There’s a whole other side of this piece that relates to marketing, attribution, forecasting and all that stuff. Those things have to be tackled stepwise and many retailers are balking at the very first step, and that is getting their data in such a way that it’s easy to use and apply to improve their business.
Once a retailer signs a solution like NetSuite, it’s important to look at the internal and external talent pool the business has access to that will enable it to continue growing and making the most with their systems. I think the design agency is generally a very important element in this – some retailers might have that competency in-house, while others will need to sign an agency. This is useful because you need people who know how to pull apart the marketing – analyse the impact that messaging and creative has on sales with the help of the data, and use it to further benefit optimisation. One of the biggest areas for scrutiny at the moment also lies in inventory and the supply chain.
MT: The big, local brands now know they can’t protect their bricks and mortar business from the internet. Everyone now tends to begin the discovery process with a search online. My expectation when I go into store is that I’m not going to pay extra for something just because it’s in-store, but the opportunity exists for the retailers to find a way to make a sale when I’m there. They need to revisit their strategy to be able to offer something that’s competitive.
Incumbency is a huge problem for Australia’s biggest brands. It’s about somehow manoeuvring a massive business model into a position that it’s able to make incremental revenue increases without sacrificing it in doing so. They need to know how to make this e-commerce business model start to work for them when there are just so many competitors that are already there.
There are very few products in Australia that are unique to our market, and that’s the real threat that local retailers have to face. If they can’t find a way to deliver the same items faster, more cheaply or both compared to their US competitors, then they’re simply not going to be able to survive.
How can retailers overcome these issues? What are the first steps to take to strategise around incumbency, legacy systems and old business practices?
AL: Nobody wants to replace their infrastructure, nobody wants to remodel their business, so you really have to feel that threat before you’re willing to make the necessary changes. If there isn’t enough fear in the water then people are going to continue what they’re doing.
You first need to look at examples in other markets that weren’t able to adapt. Look at Circuit City in the US if you need a good case in point – a very big electronics chain that really suffered from a lack of agility. The second thing is to look at your customers and find a way to give them what they want. The store can be a competitive advantage rather than a cost.
The fact is, it’s retail as usual. Retailers need to ask themselves, do they have the product close to the consumer at a reasonable price? After that it’s just a case of impressing those consumers with the service available to keep them coming back. They just need to stop worrying about cost as the root of all evil.
MT: People will pay a premium to buy locally, but only if the experience is there. Consumers don’t have time for poor service – they want to buy from people they can trust and who will look after them and then the price doesn’t seem to be such a big issue.